Exports will drive manufacturing: Kamal Nath

Amiti Sen & G Ganapathy Subramaniam, TNNApr 12, 2008, 02.21am IST

Kamal NathWhile the final annual supplement to the foreign trade policy has not showered new schemes for exporters, commerce & industry minister Kamal Nath has managed to wangle some long-awaited concessions that had been ignored in the Union Budget. Soon after announcing a package for rupee-hit exporters, he spoke to ET about the growing importance of foreign trade in maintaining GDP growth. Surge in export-driven manufacturing would create more jobs, he said in an interview.Excerpts:

Keeping the strong rupee in mind, are there enough reasons for exports to cheer this policy?

The biggest achievement of the policy is the extension of tax exemption for EOUs by one more year beyond 2009. There is an expansion in the scope of the focus-product and focus-market schemes with an additional outlay of Rs 1,000 crore, which would greatly benefit a large section of exporters.

Extension in the interest subvention schemes will also ensure cheaper credit for exporters for another year and is worth another Rs 1,050 crore. The import duty for capital goods under the EPCG scheme has been brought down to 3% from 5%. So now, exporters can import machinery which might otherwise attract import duties of up to 12.5%.

There are a lot of procedural simplification issues as well which will help exporters and importers in their day-to-day business.

What gives you the confidence that the steep export target of $200 billion for 08-09 will be achieved?

The loss of growth momentum is more in the developed countries, especially in the biggest engine of growth, the US. It is not so much in Asia.

In India, there is new manufacturing capacity which is coming on-stream. I don't see our trade basket having been ripped. Our gems & jewellery sector is facing sluggishness a little bit, but that is mainly because of the GSP being withdrawn.

How will the policy help in achieving higher exports?

I am creating a synthesis of the focus product and focus market schemes. The idea is to identify a particular product with a lot of potential but no presence in the market of a particular country.

Take garments, for instance. We send huge consignments to the US and the EU, but nothing to Japan. While neither garments or Japan get covered under the focus product and focus market schemes, they will now be covered under the improvised scheme. We will identify more such products and markets.

Will the policy also help in containing inflation, particularly steel prices?

We have withdrawn all export benefits given to steel, including DEPB and incentives under focus product and focus market schemes. Just check the amount of steel that was going under focus market to Africa. Now, all that is gone.

The government has banned the export of commodities including rice, leading to protests from producers. Will the situation be reversed?

Andhra Pradesh farmers are expecting a huge rice crop and they are protesting against the ban. We will definitely have to open exports of products when the situation calls for it. We can't have the farm sector going down.